Key Points
Cartrack subscription revenue grew 20% in the fiscal second quarter.
Cartrack net subscriber additions increased 34% to a record 94,516 during the quarter.
Commercial customer annual recurring revenue retention rate remained at 95%.
On its second quarter of fiscal year 2027 earnings call, held on Oct. 20, 2026, Karooooo (NASDAQ:KARO) announced that Cartrack constant currency subscription revenue growth accelerated to 23% across its global markets from 21% in the prior quarter.
For long-term investors, this acceleration shows that past investments in sales force capacity are successfully generating recurring cash flows. Cartrack subscription revenue makes up 98% of the core software platform, providing clear financial visibility as the business scales. Three things management said on the earnings call stand out.
1. Long-Term Unit Economics Outweigh Accounting Profit Fluctuations
Upfront sales expenses and hardware costs weigh down accounting margins during periods of rapid expansion. Management evaluates performance on unit economics rather than short-term accounting margins, noting that underlying operating margins would reach roughly 40% if customer acquisition spending stopped.
So much of our customer acquisition costs are expensed up front and the revenue is over the next couple of years. So that's not aligned. All of these operating profit margins, you nearly need to average it out over a period of five or six years to get our real operating profit margin.
-- Zak Calisto, Founder and Group Chief Executive Officer
2. Upfront Hardware Investments Protect Operating Margins From Inflation
To defend against component price increases, management built up inventory for its in-vehicle internet of things (IoT) physical hardware devices, which are connected equipment that collects operational vehicle data. This allocation of capital secures hardware inventory and shields subscription margins against rising memory chip costs.
Given our accelerated growth, we increased our investment in vehicle IoT devices for both current and future use, including memory, to create a buffer against rising RAM and memory prices.
-- Hoe Shin Goy, Chief Financial Officer
3. Product Cross-Selling Drives Expansion in Core Markets
Expanding add-on features like video intelligence and asset monitoring tags allows the business to increase annual recurring revenue (ARR) -- the yearly value of subscription contracts -- from existing clients without incurring full customer acquisition costs. This combination of new user growth and product cross-selling drives expansion in established markets, such as South Africa, Karooooo's largest and most mature market.
Importantly, South Africa subscription revenue growth accelerated to 25%. This represents the seventh consecutive quarter of subscription revenue growth acceleration in South Africa. The pace of growth reflects our deliberate strategy to cement our leadership position in South Africa through a balanced combination of subscriber additions and selling video and Cartrack Tag to our existing and new customers in South Africa.
-- Carmen Calisto, Chief Strategy and Marketing Officer
Looking Ahead
Subscription revenue momentum is building as previous sales capacity investments yield returns across international regions. High customer retention rates, proprietary data processing capabilities, and an unleveraged balance sheet allow the business to fund expansion organically while paying dividends.
Year to date, we have delivered record net subscriber addition and healthy retention, driving 32% Cartrack constant currency subscription revenue growth. We believe we are on track to accelerate Cartrack subscription revenue growth in FY 2027 as we realize the benefit of our recent investment in sales capacity.
-- Hoe Shin Goy, Chief Financial Officer
Management is matching sales force hiring with individual productivity metrics while deploying artificial intelligence tools across internal operations and client features. By pairing product development with disciplined capital allocation, the company remains positioned to compound value across physical operations markets.
We are continually developing and bringing product to the market, and we continue to also develop our sales skills to be able to get that product adoption, and I think we are making good progress.
-- Zak Calisto, Founder and Group Chief Executive Officer
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